Oil, its linkages, its by-products, and its enabling nature is what attracted Dhirubhai to oil as a business. It wasn’t just about oil itself – it was always about all of what oil allowed one to get into as a business. And it is the same now – it’s not about telecommunications and data. That just enables Reliance to get into – well, everything, really.
More and more major businesses and industries are being run on software and delivered as online services — from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.
Remember, this was written in the year 2011. We’re talking Indian winning the World Cup, Obama as the President of the United States of America, and the biggest threat to the global economy was the worry that 2008 would somehow erupt all over again. Or something like that.
And to help you understand quite what this means in practice, let’s talk, um, boogers. It’s bad enough that we’re talking about them, I agree. Imagine having to eat them, and imagine they were not even yours!
When two Domino’s Pizza employees filmed a prank in the restaurant’s kitchen, they decided to post it online. In a few days, thanks to the power of social media, they ended up with felony charges, more than a million disgusted viewers, and a major company facing a public relations crisis. In videos posted on YouTube and elsewhere this week, a Domino’s employee in Conover, N.C., prepared sandwiches for delivery while putting cheese up his nose, nasal mucus on the sandwiches, and violating other health-code standards while a fellow employee provided narration.
As you might imagine, things weren’t looking good for Dominos. So what did they do?
BILL TAYLOR: So this is the part of the Domino’s story that struck me more than anything, when he simply declared for all to hear, we no longer think of ourselves as a pizza company. We think of ourselves as a technology company. I said, excuse me? Well, turns out, they’re headquartered in Ann Arbor, Michigan. They’ve got 800 people working in headquarters. Fully 400 of those, half of their headquarters employees, are engaged in software analytics and big data. They really– once they finally got the product right, they really are, from this point going forward, as much a technology company as they are a food company. And many of the initiatives have to do with making it as easy, as convenient, as kind of natural and impulsive almost to order Domino’s, much more so than any other pizza company. So it began very early on with the Domino’s smartphone app. They then went to the capacity to order a Domino’s over text messaging. Now you can literally tweet an emoji of a pepperoni pizza, and a pepperoni pizza will appear at your doorstep within 30 minutes. You can order it through Facebook messaging. They’re simply saying to themselves, we understand that a big piece of our customer base are young people, millennials, or what have you. And he knows where those people are and where they’re spending their time, and that capacity while you’re on Facebook to simply go over to Messenger and pop in an order or while you’re sitting there, you know, tweeting out various things to also tweet out a Domino’s emoji, because you’ve pre-registered, it’s really a very powerful thing.
They decided to become a software company. Yes, that’s right, Dominos is not a pizza company that uses software, it is a software firm that happens to deliver pizzas.
Dominos is one of the best examples I can think of that helps you understand what Andressen was getting at when he said software is eating the world. It was literally eating up a pizza (company, that is)!
Amazon and Jeff Bezos
As you may have heard, Amazon and it’s owner are doing fairly well:
Jeff Bezos added $13 billion to his net worth on Monday, the largest single-day jump for an individual since the Bloomberg Billionaires Index was created in 2012. Amazon.com Inc. shares surged 7.9%, the most since December 2018 on rising optimism about web shopping trends, and are now up 73% this year.
Why are they doing so well? Because the global pandemic has accelerated what was already a very obvious trend: online shopping is here to stay.
Perhaps the single most dramatic example of this phenomenon of software eating a traditional business is the suicide of Borders and corresponding rise of Amazon. In 2001, Borders agreed to hand over its online business to Amazon under the theory that online book sales were non-strategic and unimportant. Oops. Today, the world’s largest bookseller, Amazon, is a software company — its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary. On top of that, while Borders was thrashing in the throes of impending bankruptcy, Amazon rearranged its web site to promote its Kindle digital books over physical books for the first time. Now even the books themselves are software.
Like Dominos, Amazon is a software company that happens to sell books, and just about everything else you can imagine. The stock market is simply acknowledging in 2020 what Andreessen had predicted in 2011.
What does software allow one to do that one could not earlier?
Andreessen answer the question in his essay by pointing out two factors, the first of which I read as unlocking demand:
Over two billion people now use the broadband Internet, up from perhaps 50 million a decade ago, when I was at Netscape, the company I co-founded. In the next 10 years, I expect at least five billion people worldwide to own smartphones, giving every individual with such a phone instant access to the full power of the Internet, every moment of every day.
And the second is the disintermediation of technology. That’s a big word, but it is simply explained: the elimination of the middle man.
Consider this post you’re reading right now. You’re reading it on your device (laptop/tablet/smartphone). Much more impressive is the fact that I was able to put up a website, set up an email subscription service, have a personalized email address – and all of this without paying anybody else a single penny to have all this done for me. Don’t get me wrong, I pay Google and WordPress money every month, but at my end, it was a one man show. No IT department, no IT consultant, nothing.
On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries — without the need to invest in new infrastructure and train new employees. In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month. Running that same application today in Amazon’s cloud costs about $1,500 a month.
So whether you want to write a blog (yours truly), order food (Zomato), buy groceries (Bigbasket), learn stuff online (Byju’s), get your leaky faucet fixed (Urban Company) – or anything else you can think of really – it is all enabled by the fact that everybody has a device that enables them to connect to the Internet, and the fact that building out a company is cheaper than ever before.
So Who Are The Winners?
Well, I find it pretty cool that I am able to write a blog that a lot of people choose to read daily, and the local pizza delivery place is quite happy that is is able to compete with somebody like Dominos. And hopefully you are happy that you get to read this post while chomping on a slice of pizza.
But the real winners? The intermediaries.
But wait, you might say. Didn’t the internet enable disintermediation? Well, no, not really. It replaced a lot of inefficient middlemen with a few super efficient ones.
If, in the pre-internet era, I wanted to write a series of essays that people could read, the barriers to entry were quite significant. They could be published as a book, or as a series in a newspaper, or in a magazine. But then would come the difficult job of publicizing the fact that I had written these essays. People would send in their comments (maybe via mail, maybe in conferences/book launches) and I would reply to them, but these would be available for everybody to see.
Today? Hit publish, and people who follow me on Twitter/LinkedIn/Facebook get to not only read the essay, but they also get to work as my marketing team, and they get to comment right away. Said comment can be replied to near instantaneously, and that conversation is also available for everybody to view and ponder on.
What allows this to happen? Well, I pay WordPress money to keep this blog up, and I pay Google so that I have a personalized email ID. Without these two companies (and their competition), this blog is well nigh impossible.
What the intermediaries have done is the following:
Earlier, a select group of people could get in touch with a select group of customers at very high costs. Today, anybody can get in touch with anybody at very low costs
A restaurant (let’s call it Vaishali) can get in touch with a potential customer (let’s call him Ashish) and online delivery of food can happen, even in times such as these. I get my upma and filter coffee, Vaishali gets its money, but in the long run, the real winner is Zomato.
A homeowner in Paris (let’s call her ABC) can get in touch with a potential traveler (let’s call him Ashish) and I and my family can stay in said homeowner’s apartment during our trip to France. The homeowner gets money for a home she isn’t currently occupying, I get a memorable holiday, but the real winner is Airbnb.
And so on.
Uber, Oyo, Swiggy, Urban Company – there’s no end to these examples, and these, as per Andreessen’s essay, are the real winners.
The coup de grace
What if these intermediaries were either owned by one entity? What if that entity, because it knew what you were doing in n separate transactions across n different platforms, could flawlessly predict what you needed next, on the n+1th platform? And could provide you that need at the lowest price possible?
Let’s go back to the beginning of this post:
Oil, its linkages, its by-products, and its enabling nature is what attracted Dhirubhai to oil as a business. It wasn’t just about oil itself – it was always about all of what oil allowed one to get into as a business. And it is the same now – it’s not about telecommunications and data. That just enables Reliance to get into – well, everything, really.
The basic thesis in that essay was that the reason the Amazon/Airtel, Google/Vodafone ideas made sense was because all the major players wanted to be present in the entire space.
But the recent investments in Jio take our story down a different path:
I wrote that Daily Update on the occasion of Facebook investing $5.7 billion for a 10% stake into Jio Platforms; it turned out that was the first of many investments into Jio:
In May, Silver Lake Partners invested $790 million for a 1.15% stake, General Atlantic invested $930 million for a 1.34% stake, and KKR invested $1.6 billion for a 2.32% stake.
In June, the Mubadala and Adia UAE sovereign funds and Saudi Arabia sovereign fund invested $1.3 billion for a 1.85% stake, $800 million for a 1.16% stake, and $1.6 billion for a 2.32% stake, respectively;
Silver Lake Partners invested an additional $640 million to up its stake to 2.08%, TPG invested $640 million for a 0.93% stake, and Catterton invested $270 million for a 0.39% stake. In addition, Intel invested $253 million for a 0.39% stake.
In July, Qualcomm invested $97 million for a 0.15% stake, and Google invested $4.7 billion for a 7.7% stake.
With that flurry of fundraising Reliance completely paid off the billions of dollars it had borrowed to build out Jio. What is increasingly clear, though, is that the company’s ambitions extend far beyond being a mere telecoms provider.
That excerpt is from an essay written by Ben Thompson over on Stratechery.com, and it is one I will be quoting from extensively in today’s post, along with two other essays.
The last sentence in that essay is the basic idea behind my essay today: what exactly are Jio’s ambitions, why are those ambitions whatever they are, how is Mukesh Ambani going about meeting those ambitions, and what will the ramification be on India – and then the rest of the world.
What are Jio’s ambitions?
Think back (or scroll up) to that diagram I have above. Jio doesn’t want to (and never did want to) build out a large telecommunications firm and stop there. Building out the telecom infrastructure, expensive though it was, was the means to an end. And when I say expensive, I mean expensive: 30 billion dollars!
From a strategic point of view, this is impressive, but one has to call out RIL’s execution and ability to deliver on its vision. Here it is really important to circle back to the core petroleum business. Not many companies in India would have the ability to plough in ~$30B+, the biggest private sector investment in the country’s history, to build a broadband network to cover the country. The legacy business gave RIL the buffer and cash reserves to do this (see below for RIL’s capex over the past five years).
I came across this essay via Ben Thompson himself on Twitter, and I wish I had been aware of this newsletter earlier:
But why did Jio spend those 30 billion USD? With what objective in mind?
I suppose all of you are sick and tired of the phrase “data is the new oil”, and I am too – but the bad news is, there really is no better answer to our question in this section.
Oil, its linkages, its by-products, and its enabling nature is what attracted Dhirubhai to oil as a business. It wasn’t just about oil itself – it was always about all of what oil allowed one to get into as a business. And it is the same now – it’s not about telecommunications and data. That just enables Reliance to get into – well, everything, really.
The distinction is important: when I say data is the new oil, I don’t mean the fact that data about you (and everybody else will be collected). Mukesh Ambani understands that statement to mean that whoever controls the pipe through which data (or oil) flows wins.
Jio’s ambition is to be in the 21st century what Reliance was in the 20th: the sole controller of oil data
Why are those ambitions whatever they are?
People love to talk about moats in the tech world:
The term economic moat, popularized by Warren Buffett, refers to a business’ ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms. Just like a medieval castle, the moat serves to protect those inside the fortress and their riches from outsiders.
But perhaps a better way to understand both what Dhirubhai and Mukesh Ambani have done (with oil and data respectively) is to not think of those businesses as having moats around them but to think of these businesses as walls around the Indian consumer.
A moat protects a business. But Jio in particular is a business that is a moat. If other businesses want to get at the Indian consumer, you must literally get Jio’s permission. And the other way around too: if an Indian consumer wants to get at the Internet, she must do so through the Jio moat.
Mukesh Ambani, in an analogy that might make sense in today’s day and age, wants Jio to be Heimdall.
Heimdall is the brother of the warrior Sif. He is the all-seeing and all-hearing guardian sentry of Asgard who stands on the rainbow bridge Bifröst to watch for any attacks to Asgard. He partly won the role through using his eyesight to see an army of giants several days’ march from Asgard, allowing them to be defeated before they reached Asgard, and making their king a prisoner. (emphasis added)
Another way of thinking about this is to liken Jio to China’s Great Firewall:
The Great Firewall of China (GFW; simplified Chinese: 防火长城; traditional Chinese: 防火長城; pinyin: Fánghuǒ Chángchéng) is the combination of legislative actions and technologies enforced by the People’s Republic of China to regulate the Internet domestically. Its role in Internet censorship in China is to block access to selected foreign websites and to slow down cross-border internet traffic. The effect includes: limiting access to foreign information sources, blocking foreign internet tools (e.g. Google search,Facebook, Twitter, Wikipedia,and others) and mobile apps, and requiring foreign companies to adapt to domestic regulations. Besides censorship, the GFW has also influenced the development of China’s internal internet economy by nurturing domestic companies and reducing the effectiveness of products from foreign internet companies. (Emphasis added)
I don’t mean that analogy as a criticism – far from it. Quite the opposite, in fact, I say it with great admiration. In the part that is emphasized above, substitute Jio for GFW, and Mukesh Ambani’s playbook starts to make a lot of sense!
Ben Thompson makes a similar point in his essay…
The key to understanding Ambani’s bet is that while all of the incumbent mobile operators in India were, like mobile operators around the world, companies built on voice calls that layered on data, Jio was built to be a data network — specifically 4G — from the beginning.
… but to my mind, doesn’t go far enough. Yes, data first, and yes, Jio got it right, but it is the strategic thinking behind “OK, what’s next after I’ve won the telecom sector” that’s truly impressive.
This section is titled “why are those ambitions whatever they are?” The answer boggles the mind.
How is Mukesh Ambani going about meeting those ambitions?
Three excerpts, all from the same author, but across two essays:
It’s very common now to talk about Reliance’s political connections and proximity to the government. This too has a deep seated history. Quite simply, you couldn’t be an industrialist or entrepreneur in India in the 1970s without currying favour with the government or having the right friends. Ambani became adept at this, forging ties with close aides of Prime Minister Indira Gandhi, like R.K Dhawan and T.A. Pai.
Reliance at the time was seen as such a creature of the Congress that Rajiv Gandhi, who had become Prime Minister in 1984 after his mother’s assassination, wanted to keep a distance from Ambani. S Gurumurthy and Shourie both have ties to the BJP, the ruling administration now. Gurumurthy is co-convener of the Swadeshi Jagaran Manch (affiliated with RSS) and currently on the Board of the Reserve Bank of India.
There’s, of course, also the question of regulatory capture and how much of a role that will play in RIL and Jio’s continued success. Pretty much every time an investment in Jio was announced over the last couple of months, a pointed note was made of Reliance’s closeness with the current government. These allegations have dogged Reliance regardless of administration. One argument is that Ambani basically controls whichever government is in power.
You couldn’t have built an empire around polyester, or oil, or data, without at least the tacit help of the government. Mukesh Ambani, and his father before him, learnt an obvious, if difficult to master, lesson. You need to be friends with whoever is in power. This is always true, but especially so in a country like India.
Because our babudom delights in coming up with rules and then making money off of the inevitable violation of those rules, the only way to avoid this problem is by making friends with the people who sit on top of the babus in the pecking order. And that’s not the BJP, or the Congress, or the United Front: it’s all of them. And when whoever happens to be in power wants a particular tune to be sung, it will be sung.
That, like it or not, is just good business sense.
So no, Mukesh Ambani is not especially close to Narendra Modi, and neither was Dhirubhai Ambani especially close to Indira Gandhi/Rajiv Gandhi. The key word in the previous sentence is “especially”. The Ambanis are especially close to the throne, and they don’t particularly care who is occupying it at just the moment.
They do care that the occupant not get in the way of their business, and that they have managed quite magnificently. Again, I mean this in an admiring sense, not as a critique. It remains the only way to do business in India on a very large scale, like it or not.
I think an easier answer is that Reliance knows how to work the system. I recently read this article by Mark Lutter, which argues that one thing that constrains Silicon Valley’s ability to build is that it hasn’t engaged seriously with politics. “Part of politics will be co-opting old institutions. Get innovation sympathizers in key positions of power.”
My only contention in this section is that you can’t answer the “how” without getting creative about working around the inevitable regulatory hurdles, and nobody is more creative in this regard than the Ambanis.
What will the ramifications be on India and the rest of the world?
India will – I don’t see any alternative to this – eventually become a duopoly when it comes to telecommunications. Vodafone is a dead man walking, and BSNL/MTNL are deadweight that the Indian government can support for only so long. Airtel remains the only credible competitor, although it’s challenges are going to be many, and very painful
And eventually, a very large part of India’s communications, commercial transactions will all go through Jio’s services. This, as the author mentions, may or may not be true, but I love the uniquely Indian example:
One use case I recently heard anecdotally was of JioMeet being used for day-long satsangs. This could be an apocryphal story, but to be honest, it is such a specifically Indian use case, that I can believe it. Can you imagine the kind of customer connections Jio can build if it becomes the default satsang app during the era of Covid?
Jio’s network and its work on 5G, which takes years, was by definition not motivated by a phrase Prime Minister Modi first deployed two months ago. Rather, Ambani’s dedication hinted at the role Jio investors like Facebook and Google are anticipating Jio will play: .. .. Jio leverages its investment to become the monopoly provider of telecom services in India. .. .. Jio is now a single point of leverage for the government to both exert control over the Internet, and to collect its share of revenue. .. .. Jio becomes a reliable interface for foreign companies to invest in the Indian market; yes, they will have to share revenue with Jio, but Jio will smooth over the regulatory and infrastructure hurdles that have stymied so many (emphasis added)
Remember the Heimdall analogy? The emphasized part above is the Heimdall play at work. You can enter Asgard India, sure, but only at Heimdall’s Jio’s pleasure, and Facebook and Google, among others, already have agreed, and backed up their agreement with cold hard cash.
Every five years or so, a big telco thinks it can move up the stack and compete with the internet. This is a little like a municipal water company trying to get into the soft drinks business. Jio may be different: it has a more captive, less sophisticated base, a retail arm to leverage, and maybe more ability to innovate and understand the market. Or maybe not.
Benedict Evans’ Newsletter from the 21st of July
He elaborates on this further (read the entire conversation on Twitter):
Essentially, Evans’ point seems to be that other companies in other countries have tried what Jio is trying to do now, and maybe it won’t work out here because it hasn’t worked out there.
Maybe. The thing that makes me want to bet against Evans’ contention is how close Mukesh Ambani is to the government, and how involved the government in India has always been when it comes to regulation. In other words, I’m not betting just on how good Jio is (and it is good, but Evans has a been there done that gut feel – and he could be right). I’m also betting on how not laissez-faire our regulation is in practice. And that, weirdly, is the ace up Mukesh Ambani’s sleeve.
I, along with the rest of the universe, came across this meme the other day:
Today’s post is about explaining what is wrong with this image, but also why thinking about it really, really matters. Let’s begin:
Electricity and Education: More Similar Than You’d Have Thought
This Friday, I’ll be launching a new YouTube series on India’s electricity sector. Stay tuned for further details.
The reason I bring this up right now, is because one of the points we cover in that first episode is about how the electricity sector in India became much better after generation, transmission and distribution were “unbundled”.
And thinking about that point helped me frame a question about the education sector in India. I have written about this before, but I’ll expand upon that thought in much greater detail today: unbundling college.
The Typical College Bundle
What does the typical bundle in college look like? Something like this:
A student writes the entrance exam and gets in, attends classes, makes friends, writes internal examinations, gets an internship, gets placed, writes the semester end examination, gets the degree. And next year a new batch comes in, and we rinse and repeat. That, in a nutshell, is the higher education sector, at least in urban India.
One point worth emphasizing here: when I say peer networks, it is actually much more than that. Well, at any rate, it should be much more than that. Mentors, in particular, are best discovered in college.
You really should read the article in its entirety, but here’s the quick takeaway: some firms, like Apple, are vertically integrated. Everything, right from deciding which kind of screw should be used in the construction of the latest iPhone, to the OS (that is, the software), to the in-store experience – everything is controlled by Apple. Hell, they don’t let you change the number of icons in the dock! It is a vertically integrated firm.
Other firms, such as Netflix, are horizontal. You can watch Netflix on Chromecast, on the Firestick, on your laptop, on your tablet, on your phone – Netflix honestly doesn’t care where you watch it, so long as you pay them their monthly fees. In fact, they will go out of their way to make sure that you can watch Netflix no matter what device you own. Netflix is a horizontal firm.
And that’s one way in which the forward I received the other day is wrong. Every other service on that forward is a horizontal firm. But Harvard? Entirely vertical. They control who gets in and how, they control what they’re taught and how, they control who gets the degree and how. They don’t even need to control the peer network: the Harvard alumni network is one of the reasons getting into Harvard is worth the effort, so naturally the alumni themselves will work to maintain the exclusivity. Entirely vertical!
Now, the reason that forward exists, and the reason that forward became as popular as it has, is because there is more than a grain of truth to it, especially in the year 2020.
Take a look at it again:
Most students in most colleges the world over are asking a very simple question: if we are to sit at home and watch videos, why restrict ourselves to what our college professors have to say?
Hell, for that matter, why should I bother coming up with a teaching plan when all I have to do is point students towards all of these resources?
And as the forward asks, or at least implies: if that is indeed the case, then why pay tuition fees this year? Not just Harvard students of course – every student is asking this question.
So What’s the Answer?
Well, microeconomics 101: a good place to begin is by asking what you’re paying for when you pay those tuition fees. And as I wrote in a blog post a while ago, you’re paying for much more than classes:
Now, the problem of education: when you buy a degree from college, you’re getting all three things. College is a bundle: education | credentialing | peer networks
Harvard is not charging you money to teach you stuff you can learn elsewhere. Those guys – the people who run the place and the professors who teach there – they’re pretty good, y’know. They know you can learn that stuff elsewhere.
You are paying your local college an obscene amount of money for the other two things. Coursera might be able to give you a better econ prof than your local college, but Coursera can’t yet give you a certificate that carries as much weight as does the one from your local college. This is much more true if you sub in Harvard for your local college.
Or put another way, Coursera existed since before the pandemic. Yet enrollments happened in colleges, did they not?
Enrollments happened because people weren’t buying lectures.
They were buying access to the peer networks, and they were buying the certificate.
And Harvard – and most other colleges the world over – are effectively saying that the certificate is still as valuable in 2020 as it was in 2019. Arguably more so, and so no discounts.
OK, But What About Peer Networks? Surely A Discount There?
Um, well, no. And for two reasons.
First reason, this excellent argument from Tyler Cowen:
Perhaps the logical conclusion is that both the “social connections/dating” services of Harvard and the certification services of Harvard are strong complements. If you are certified by Harvard, but live on a desert island, or carry a contagious disease, that certification is worth much less. So it is hard to unbundle the services and sell the certification on its own, without the associated social networks. Nor is it so worthwhile to sell the social connections on their own. Harvard grads are socially connected to their dry cleaning workers as it stands, but that does not do those workers much good.
Peer networks develop best when you go through intense, shared experiences. Both adjectives matter: just hanging about in a college without going through the same grind that everybody else is going through doesn’t cut it (skin in the game). And that grind must be intense, it can’t be an optional, laid-back thing.
So sure, the grind is going to be online this year, but it still is shared, and it still is intense. That’s what helps with the bonding, and that bonding is valuable enough for Harvard to get away by charging you USD 50,000.
Peer networks developed online can be an extremely valuable resource, by the way. Ask David Perell or Seth Godin, to name just two people.
Second, those peer resources stay with you for life. You develop them now, but they get even better with time than does wine! As your peer group grows and matures, the number of connections they open up increases exponentially. So even if you can’t meet your peer group in a physical sense, it still is an investment worth making.
Tyler Cowen again:
Keep also in mind that the restricted Harvard services are probably only for one year (or less), so most students will still get three years or more of “the real Harvard,” if that is what they value. And they can use intertemporal substitution to do more networking in the remaining three years. It’s like being told you don’t get to watch the first quarter of a really great NBA game. That is a value diminution to be sure, but there will still be enough people willing to buy the fancy seats. Most viewers in the arena don’t watch more than three quarters of the game to begin with.
If anything, Tyler Cowen’s analogy is slightly off the mark. The people who watch the NBA game in the stadium are never going to get in touch with each other twenty years down the line, much less depend on them for jobs or references.
So no, no discounts for reduced peer network benefits in 2020, sorry.
So far, Harvard can still justifiably charge you USD 50,000 – and they will.
So What Next?
Well, think of many vertically integrated colleges, all offering more or less the same kind of services:
… and ask yourself how we could introduce horizontal services into this structure. LinkedIn and Coursera attempt two separate models:
But the real way, if you ask me, to think about how to unbundle college is by expanding our framework a little bit more:
This is a blog post, not an academic paper, much less a book. And therefore, forgive me for using catch-all terms here. By recruiters, I mean literally anybody who will work with graduates in any capacity: colleagues in start-ups, government, think-tanks, and yes, recruiters.
But the point of the framework I shared above is this: it will help us understand where change will come from, if at all it must.
Put another way, do you think $50,000 for Harvard (or whatever amount for whichever college) is too expensive? Then you need to explain how you can get the same things (or more) that a bundled college degree gives you for a lesser price with a different model.
How to get, that is to say, credentialing, peer networks and learning (and maybe more) for less than USD 50,000. That’s the million dollar question. And even if we come up with an answer, you’ll be up against the following:
Colleges will be unwilling to change for two reasons.
Why change something that isn’t broken? And college isn’t broken, from the perspective of the college.
Firms such as Coursera and LinkedIn will struggle to replicate the “full-stack” experience that college has right now. And a piece-meal horizontal replacement will never be as valuable.
Government will be unwilling to change the way college is structured right now
Because of lobbying by colleges themselves
Because too radical a change is a risky move, with unpredictable upsides and more than a little chaos in the short run
Parents and students will not want colleges to change far too much, because the system as it stands right now is what enables jobs to come by.
And that, finally, leaves recruiters. Or as I explained above, it is us: society. Until we (society) acknowledge the fact that college as a bundle has become too sclerotic, too expensive and too rigid for its own good, we can’t begin to change it.
And so, it ultimately comes down to this: we need to prove the inefficiency, and therefore the relative expensiveness of college as it stands today to society, before we can begin to talk about reforming it.
Well then, let’s get to proving the inefficiency of college as it stands today. That’ll be next up!
Capital Mind, one of my favorite blogs to read, recently posted an excellent write-up on how Bharti Airtel is faring over the last three to four years. You might have to sign up in order to read it, but happily, Capital Mind allows you a free trial, so you should still be able to access it.
Why do I think you should read it, and why am I talking about this today? Because we need to think about telecommunications, technology, monopolies, scale, regulations, FDI in order to understand why Amazon may well be interested in buying Airtel, or at least in owning a stake.
Airtel has issued a boilerplate disclaimer since, but, well. Come on.
But hang on a second. We first need to get a basic framework in place, before we start thinking about everything else.
Our framework will consist of three things (or actions) that we tend to do on the internet, three international behemoths that are very, very interested in India, and three telecommunications firms that are very heavily invested in India.
First, the three things that all of us tend to do on the Internet. We create content, we consume content and we engage in commerce.
Let’s begin with the one in the middle. When you’re lying on your sofa at three in the morning, flicking through Netflix’s endless library of content, you are very much a consumer. When you roll your eyes at the latest dripping-with-insanity forward you receive on your family Whatsapp group, you are a consumer of content online. When you run a search for a PDF that will help you finish an assignment in college: consumer. For most of us, the internet enables us to consume stuff at levels that have never before been possible. Music, videos, podcasts, the written word: all consumption.
Now let’s move on to the one on the left: creation. You weren’t around when I wrote these words that you are reading, but I was creating stuff. Your latest Instagram story? Creation of content. The latest GIF that you created before sharing it? Creation of content. Do you upload videos on Insta/YouTube/Vimeo? Do you blog? Do you create podcasts? All content creation.
And finally, the reason Jeff and Mukesh are as rich as they are: commerce. Online shopping is literally blowing up in front of our eyes in terms of value. Amazon, Flipkart, Nykaa, all of Jio’s online shopping, MakeMyTrip, Oyo, Airbnb, Uber, Zomato… the list is endless, and exhausting. That’s the third thing you do online. Commerce.
Ah, you might say. What about a Whatsapp call with friends, or a Skype call with family, or a Zoom online seminar (god help us all)? That’s arguably consumption and creation at the same time, no?
Well yes. Or call it communication.
Creation and consumption of content are really two sides of the same coin, and when they happen simultaneously, they are all of what we spoke about in the last paragraph.
There is a world of thinking to be done about the blue rectangle on the left. About how Google cornered the consumption of stuff online using Gmail, Google Maps etc, by piggybacking on it’s search monopoly, and about how Facebook took away the search monopoly by creating its own walled garden and making Google search irrelevant within it, and how Google tried to respond with Google Buzz-no-Wave-no-Plus-no-WhateverNext and failed… and this can go on. But here’s the quick takeaway:
When it comes to content creation, or content consumption, or communication, Google and Facebook have the market pretty much tied up between them. The battle for who wins between them will continue for a while, and it will be a fascinating story, but for our purposes, it is enough to realize for today that Google and Facebook are mostly on the left. That’s not entirely true (Google Play Store, Froogle, Facebook Marketplace being just some examples), but it’s good enough for now.
Google and Facebook are mostly communication based firms who dabble in commerce.
And Amazon, of course, is the easiest example to think of when it comes to online commerce. The Amazon app, sure, but also its delivery and logistics arm, and, of course, AWS. If I want to buy stuff online, Amazon is literally the first – and more often than not, the only – thing that comes to mind. Zomato and Swiggy for food, Uber and Ola for travel, OYO and Airbnb for hotels/lodging, MakeMyTrip/Cleartrip/Yatra for travel are also very valid examples. But we’re, as consumers, not passively consuming content over here in this space: it is a very specific transactional approach.
But then things began to get complicated.
Consider Amazon. Commerce company, very much so. But what about Amazon Prime Video? What about Amazon Prime Music? What about Amazon Photos? What about Alexa and the Echo family?
Or consider Google. What about, as we have already mentioned, the Google Play Store? What about Froogle? What about Play Movies, Play Books?
Our neat little framework now has overlaps, and there are insurgencies along this virtual boundary. But we can add to our framework to help us keep it relatively simple:
Google, which is a firm that started life as a software firm, then started to make hardware as well (Nexus, Pixel, Chromebooks, Pixel tablets, Google Glass etc). Of course people could create and consume content on these devices. Of course these devices would help Google learn more about the people who owned these devices. But wouldn’t it be great (Google thought) if we could make moaarrrrr money by using this gleaned information ourselves? Hey, let’s get into commerce.
Facebook tried to say the same thing, but with rather more limited success.
And Amazon, a firm that started life as an online seller, started to make hardware as well, precisely so as to learn more about people’s consumption habits online and offline. That’s the Echo devices, the Kindle, the Firestick and so on.
And don’t forget Apple! They no longer can rely on selling hardware alone for growth, mostly because they have already sold all the devices they possibly can to as many people as they possibly can (at least in the USA, but they’re coming for you too). And so, services! Apple Music, Apple TV, iCloud – all of these are not hardware related, they’re all about consumption of content.
So even our latest attempt at simplifying the framework fails, because none of these blue rectangles are neat and delineated: firms from every blue rectangle want to be present in the creation, consumption and commerce space.
They want to do this for a variety of reasons, but the most important reason is simply the following: they’d much rather get a “360 degree” view of their consumer, without having to rely on some other firm to share information.
If, for example, Jio manufactures the device I use to go online (JioPhone), and I log on to that device to watch JioTV, and visit Ajio to buy clothes using that device, and post about the sneakers I just bought on a social media platform owned by Jio (or well, something like that), then I’ve obviated the need for Google! Neither the device, nor the steaming platform, nor the shopping platform, nor the social media has anything to do with Google. How then, does Google know me enough to advertise effectively to me?
But, if I use a Pixel phone to stream content on my Chromecast device, and buy a pair of sneakers on Flipkart (well, in a parallel universe…) and post about it on whatever is Google’s next attempt to build a social media platform, I’m living entirely in the Google Universe.
It’s no longer about companies living in one blue rectangle, you see. It is about one company dominating all blue rectangles, and so knowing everything there is to know about the consumer. That’s the end game here.
And speaking of all blue rectangles…
And that, my friends, is why Amazon wants to be friends with Airtel, Google wants to be friends with Vodafone.
Because Mukesh has his finger in each of these pies, and Mark has acknowledged as much.
Homework: as a consumer, and as an investor, which of the three are you betting on? Amazon, Google or Jio? Why?
The title itself brought to mind Peter Thiel’s quote about being promised flying cars, and being given 140 characters instead. You may want to make a snarky joke about whether 280 characters counts as progress or not, but the point is well taken. And indeed, reinforced by this quote from David Rotman’s article: .. .. “In an age of artificial intelligence, genomic medicine, and self-driving cars, our most effective response to the outbreak has been mass quarantines, a public health technique borrowed from the Middle Ages.” .. ..
The article then goes on to highlight at least three separate aspects of why tech has failed us: lesser government support for technology and innovation (particularly in the USA), a sclerotic bureaucracy, and policy-making that is not a) proactive enough b) good at managing risks effectively c) far too focused on short-term issues d) aware of the pitfalls of focusing solely on efficiency. .. .. Let’s begin with the last of these points: .. ..
““The pandemic has shone a bright light on just how much US manufacturing capabilities have moved offshore,” says Erica Fuchs, a manufacturing expert at Carnegie Mellon University.” .. .. I teach courses in international economics at the Gokhale Institute, and one of the fundamental insights that I think students need to walk away with is the concept of a non-zero sum game. Trade makes both parties better off, and therefore more trade is good, is literally the basic starting block of a course on trade. For an excellent summary of this idea, read this article by Paul Krugman, or watch this TED talk by Matt Ridley. .. .. But two basic concepts from economics have come to haunt this rather neat idea. One is scale, and the other is the need to diversify. Both are very closely related. .. ..
If, conventional theoretical thinking goes, a firm is able to scale up effectively, it will be able to produce more for cheaper. Yes, it is more complicated than that, but that’s the gist of the benefits of scale. Now, think of all countries as firms, and China is the obvious example of a country that scaled more rapidly than other countries, and was able to produce stuff cheaper than almost anywhere else. And that’s how China became the “manufacturing centre of the world”. The more you import from China, the more they scale (and effectively!). The more they scale, they cheaper they can make stuff. The cheaper stuff gets, the more you have an incentive to import from China. And once the loop is up and running, it becomes difficult to stop. .. ..
And that’s a simple explanation for how the world ended up putting all of its eggs in one basket. We failed to diversify, because we focused on efficiency, without worrying about risk. What happens if an increasingly efficient global trading order suddenly breaks down? The price of efficiency is two fold: a) a lack of diversification b) not enough risk mitigation measures that allow one to fall back on domestic production. Which is where most of the world finds itself today. Readjusting global supply chains away from China is necessary, but it will not be easy. Especially because most countries will not want to pursue twin objectives: a) diversification away from China into other potential export powerhouses b) some production to be kept at home, especially in crucial sectors such as healthcare. .. .. Scale, and a lack of diversification. There’s a lesson in there for us at the individual level as well, of course. A single minded pursuit of some goal (say money, or career growth) at the cost of other things isn’t necessarily a good idea. .. ..
“Why couldn’t the US’s dominant tech industry and large biomedical sector provide these things? It’s tempting to simply blame the Trump administration’s inaction.” .. .. The truth is always more complicated than you think, and beware simple explanations, but that being said, you might want to read The Fifth Risk. Here’s a slightly tangential review from The Guardian if you are feeling lazy, and a quote from that article follows: .. .. “But we’re actually much more likely to die driving to the shops. The fifth risk is something impossible to conceive of in advance, or to prepare for directly. What matters is having a well-organised government in place to respond to these contingencies when they hit – exactly what the Trump administration has failed to do.” .. .. No government, or Big Ol’ Central Planner is perfect, of course (and there’s a very readable book about that topic, or here’s a fascinating review of the same book), but Michael Lewis makes the claim that the Trump administration is rather less than perfect even by our less than exacting standards. .. ..
“Any country’s capacity to invent and then deploy the technologies it needs is shaped by public funding and government policies. In the US, public investment in manufacturing, new materials, and vaccines and diagnostics has not been a priority, and there is almost no system of government direction, financial backing, or technical support for many critically important new technologies. Without it, the country was caught flat-footed.” .. .. The book to read about this topic, if you ask me, is The Entrepreneurial State, by Mariana Mazzucato. Here’s the Wikipedia link about the book. Governments need to play, she says (and I suspect the author of this article would agree), a more active role in fostering the tech ecosystem in a country. Shades of Studwell, perhaps, but I have a counterargument here: .. ..
“Incompetence and a sclerotic bureaucracy” is a phrase David Rotman uses early in the article when speaking about the Center for Disease Control in the USA. I find myself in complete agreement with the adjectives used. Why presume, then, that other government departments are likely any better? The truth, as always, lies somewhere in the middle. You can certainly make the case a la Michael Lewis, that the Trump administration took us to one end of the spectrum – but you should beware equally the other end of it! .. ..
“Economists like to measure the impact of innovation in terms of productivity growth, particularly “total factor productivity”—the ability to get more output from the same inputs (such as labor and capital). Productivity growth is what makes advanced nations richer and more prosperous over the long run. For the US as well as most other rich countries, this measure of innovation has been dismal for nearly two decades.” .. .. Well, yes, sure. And there is more than a grain of truth to the charge laid above, and not just for America. But keep in mind that measuring TFP is really and truly hard, and I am nowhere close to being convinced that we do a good job of it, even for a country like the USA, forget India. I am writing this post while sitting in my bed, using a laptop that allows me to keep multiple tabs (well over 50 right now) open in a modern browser, while being seamlessly connected to an overwhelming variety of news sources. All this while I listen to a Spotify playlist, and sip on excellent coffee that is made using home delivered Arabic beans. I’ll stop channeling my inner Keynes now, but most of this was not possible, especially at these prices, two decades ago. .. .. Progress may not be fast enough for our tastes, sure – but it has been taking place. If you would like to read a book with a take contrarian to mine, try this on for size: The Rise and Fall of American Growth, by Robert Gordon. .. ..
“The problem with letting private investment alone drive innovation is that the money is skewed toward the most lucrative markets.” .. .. Churchill’s quote about democracy comes to mind! .. ..
“In a widely circulated blog post, internet pioneer and Silicon Valley icon Marc Andreessen decried the US’s inability to “build” and produce needed supplies like masks, claiming that “we chose not to have the mechanisms, the factories, the systems to make these things.” The accusation resonated with many: the US, where manufacturing has deteriorated, seemed unable to churn out things like masks and ventilators, while countries with strong and innovative manufacturing sectors, such as China, Japan, Taiwan, and Germany, have fared far better.” .. .. Here’s is Andreessen’s post, and also, this is your periodic reminder to read How Asia Works. China, Japan, Taiwan and Germany being up there isn’t a coincidence. .. ..
““The great lesson from the pandemic,” says Suzanne Berger, a political scientist at MIT and an expert on advanced manufacturing, is “how we traded resilience for low-cost and just-in-time production.”” .. .. Options are easy to teach, but difficult to grasp, and even more difficult to implement. See put, long. .. ..
“…they are calling for an immediate ramp-up of public investment in technology, but also for a bigger government role in guiding the direction of technologists’ work. The key will be to spend at least some of the cash in the gigantic US fiscal stimulus bills not just on juicing the economy but on reviving innovation in neglected sectors like advanced manufacturing and boosting the development of promising areas like AI. “We’re going to be spending a great deal of money, so can we use this in a productive way? Without diminishing the enormous suffering that has happened, can we use this as a wake-up call?” asks Harvard’s Henderson.” .. .. More participation from the government than is currently happening, but throw also into the mix a more venture-capital-ish approach, and don’t forget prizes! In fact, I found myself wishing midway through the article that the author had explored other options, rather than the government-or-markets binary. .. ..
I hope I haven’t comes across as overly critical of the article, and my apologies if I have. That has certainly not been my objective. We rely far too much on the private sector now, that is true – and government can and should play a bigger role than is the case currently. But an extreme position, in either direction, always worries me a little!
There’s – let’s assume – 3 million people in Pune city. Let’s assume that you work in a firm that has a 1000 employees. Let’s assume that 500 people in your city have the corona virus.
Then the math says that all other things equal, there is a 15% chance that one of those 1000 employees is infected with the corona virus. Click on the link and play with the numbers to generate different scenarios.
Ah, you say, but Pune has only 16 cases so far, so there’s no need to worry.
And I agree with you, so long as we get the social distancing right. The more the virus spreads, the likelier it is that it will spread. And the more people will get it, the more people will transmit it – remember, R0 is at least 2.
Put another way, social distancing is to ensure that we don’t reach 500, let alone a higher number.
By the way, if you change 500 to 5000, the probability that a person in a 1000 employee firm has the virus shoots to 81%.
Click through to the site to take a look at a whole host of other neat visualizations – in particular, take a look at how the Case Fatality Rate (CFR) varies by country.
Now, this particular chart is interesting because it helps you understand how to think about COVID-19. The best of all worlds is the origin, of course, where the R0 and the CFR are both zero.
Chicken pox is irritating, because it spreads quickly. But the good news is it is essentially never going to kill anybody. Bird flu is dangerous, because it kills a lot of people. But the good news is that it doesn’t spread to a whole lot of people.
Diseases that kill a lot of people and spread quickly, those are really problematic. That’s why smallpox, polio and SARS are (were) so problematic. And the Spanish flu, that roamed the whole world over, was one such disease. I hope to post a book review this Thursday about it.
COVID-19 is worse than the Spanish flu.
I’d rather not excerpt from this superb visualization – and accompanying article – from the Washington Post. Also, WaPo, thank you for not putting this behind a paywall!
Side note: Harry Stevens does data visualizations better than most folks.
Tomorrow, I’ll try and share with you stories from Spain, Italy, France, Iran, South Korea and China about how they fought, and are fighting, with the virus. Any links you can send my way are most appreciated! My email address is ashish at econforeverybody dot com.
Out of all the tech companies that I have written about so far, Google is far and away my favorite, and one that I always have wanted to work at (at some margin, I still do).
It’s just – and this is a personal thing, may not work for everybody – cool.
The only reason I say this at the outset is to make sure that you’re aware of my biases!
Here we go:
I often ask this question in classes I teach in microeconomics, or introductory economics:
“What is Google’s business?”
The default answer is almost always “search”. At which point of time, I have a follow-up question: identify for me one person who has paid Google to run a search.
In fact, if anything, Google seems to go out of its way to keep Google search free. And if running a search is not to be paid for, it can’t be much of a business, right?
So what is Google’s business?
But suppose we say that Google is primarily an advertising company. That changes things. The U.S. search engine advertising market is $17 billion annually. Online advertising is $37 billion annually. The entire US advertising market is $150 billion. And global advertising is a $495 billion market. So even if Google completely monopolized US search engine advertising, it would just own 3.4% of the global advertising market. From this angle, Google looks like a small player in a competitive world.
What if we frame Google as a multifaceted technology company instead? This seems reasonable enough; in addition to its search engine, Google makes dozens of other software products, not to mention robotic cars, Android phones, and wearable computers. But 95% of Google’s revenue comes from search advertising; its other products generated just $2.35 billion in 2012, and its consumer tech products are a mere fraction of that.
That’s Peter Thiel, in From Zero to One. The context in which he wrote this apart, what matters is the fact that he’s absolutely right about the fact that Google earns a vast amount of its revenue from advertising, not running searches.
But what are advertisers paying money to Google for? To provide digital real estate, in which ads can be shown, and the impact of these ads can be measured better than ever before in history. And advertisers are willing to pay because Google understands its users better than anybody else. Why does Google understand its users better than anybody else?
Because we have some combination of the following as part and parcel of our daily lives
Google Maps | YouTube | GMail | Android | Chrome OS | Chrome Browser |
But here’s the thing: we don’t pay for any of these. By that logic, we aren’t Google’s customers. But advertisers areGoogle’s customers and that makes us Google’s… products.
So here is the kicker. Android, as well as Chrome and Chrome OS for that matter, are not “products” in the classic business sense. They have no plan to become their own “economic castles.” Rather they are very expensive and very aggressive “moats,” funded by the height and magnitude of Google’s castle. Google’s aim is defensive not offensive. They are not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free (or even less than free). Because these layers are basically software products with no variable costs, this is a very viable defensive strategy. In essence, they are not just building a moat; Google is also scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it.
All those products that I listed above? They weren’t build to generate revenue for Google (although that may be changing now), they were built to make sure that Google continued to attract, and track, eyeballs.
Google dominates every aspect of this cycle, and every announcement at IO accrued to it:
On the signal side:
Their mobile apps are both the best, and the most popular, and they work best with a Google+ account
Their browser is the best, and the most popular, and it works best with a Google+ account
Their maps are the best, and the most popular, and they work best with a Google+ account
Their video website (YouTube) is the best, and the most popular, and it works best with a Google+ account
Their mail service (GMail) is the best, and the most popular, and is a Google+ account
And they simply own online advertising, with the best, and most popular, search ads, 3rd-party ads, and display ads.
But for the longest time, Google was a hammer in search of a nail.
Google was by far and away the best search engine in the late 1990’s – it wasn’t even close. But – and it was a big, painful “but” – how to make money? Enter economics, Google style:
Googlenomics actually comes in two flavors: macro and micro. The macroeconomic side involves some of the company’s seemingly altruistic behavior, which often baffles observers. Why does Google give away products like its browser, its apps, and the Android operating system for mobile phones? Anything that increases Internet use ultimately enriches Google, Varian says. And since using the Web without using Google is like dining at In-N-Out without ordering a hamburger, more eyeballs on the Web lead inexorably to more ad sales for Google.
The microeconomics of Google is more complicated. Selling ads doesn’t generate only profits; it also generates torrents of data about users’ tastes and habits, data that Google then sifts and processes in order to predict future consumer behavior, find ways to improve its products, and sell more ads. This is the heart and soul of Googlenomics. It’s a system of constant self-analysis: a data-fueled feedback loop that defines not only Google’s future but the future of anyone who does business online.
And so Google has become a company that has changed how to think about business in tech: give away cool products for (nearly) free, in exchange for your information, that is then sold on to advertisers.
A useful way to think about Google is that you are Google’s product, not its customer. Think of it this way: if you aren’t paying for something, how can you possibly be a customer?
Facebook and Google both have the same model: ad-driven.
There are many, many things to unpack as a consequence of thinking about this business model, and we’ll get to all of these things in the weeks to come.
That’s my daughter, all of six years old. Leave aside for the moment the pride that I feel as a father and a fan of classic rock.
My daughter is coding.
My dad was in Telco for many years, which was what Tata Motors used to call itself back in the day. I do not remember the exact year, but he often regales us with stories about how Tata Motors procured its first computer. Programming it was not child’s play – in fact, interacting with it required the use of punch cards.
I do not know if it was the same type of computer, but watching this video gives us a clue about how computers of this sort worked.
The guy in the video, the computer programmer in Telco and my daughter are all doing the same thing: programming.
Programming is the art and science of translating a set of ideas into a program – a list of instructions a computer can follow. The person writing a program is known as a programmer (also a coder).
Go back to the very first sentence in this essay, and think about what it means. My daughter is instructing a computer called Alexa to play a specific song, by a specific artist. To me, that is a list of instructions a computer can follow.
From using punch cards to using our voice and not even realizing that we’re programming: we’ve come a long, long way.
It’s one thing to be awed at how far we’ve come, it is quite another to think about the path we’ve taken to get there. When we learnt about mainframes, about Apple, about Microsoft and about laptops, we learnt about the evolution of computers, and some of the firms that helped us get there. I have not yet written about Google (we’ll get to it), but there’s another way to think about the evolution of computers: we think about how we interact with them.
In the 1960s, Douglas Engelbart’s Augmentation of Human Intellect project at the Augmentation Research Center at SRI International in Menlo Park, California developed the oN-Line System (NLS). This computer incorporated a mouse-driven cursor and multiple windows used to work on hypertext. Engelbart had been inspired, in part, by the memex desk-based information machine suggested by Vannevar Bush in 1945.
Much of the early research was based on how young children learn. So, the design was based on the childlike primitives of eye-hand coordination, rather than use of command languages, user-defined macro procedures, or automated transformations of data as later used by adult professionals.
Engelbart’s work directly led to the advances at Xerox PARC. Several people went from SRI to Xerox PARC in the early 1970s. In 1973, Xerox PARC developed the Alto personal computer. It had a bitmapped screen, and was the first computer to demonstrate the desktop metaphor and graphical user interface (GUI). It was not a commercial product, but several thousand units were built and were heavily used at PARC, as well as other XEROX offices, and at several universities for many years. The Alto greatly influenced the design of personal computers during the late 1970s and early 1980s, notably the Three Rivers PERQ, the Apple Lisa and Macintosh, and the first Sun workstations.
The GUI was first developed at Xerox PARC by Alan Kay, Larry Tesler, Dan Ingalls, David Smith, Clarence Ellis and a number of other researchers. It used windows, icons, and menus (including the first fixed drop-down menu) to support commands such as opening files, deleting files, moving files, etc. In 1974, work began at PARC on Gypsy, the first bitmap What-You-See-Is-What-You-Get (WYSIWYG) cut & paste editor. In 1975, Xerox engineers demonstrated a Graphical User Interface “including icons and the first use of pop-up menus”.
In 1981 Xerox introduced a pioneering product, Star, a workstation incorporating many of PARC’s innovations. Although not commercially successful, Star greatly influenced future developments, for example at Apple, Microsoft and Sun Microsystems.
So, as the Wikipedia article mentions, we moved away from punch cards, to using hand-eye coordination to enter the WIMP era.
It took a genius to move humanity into the next phase of machine-human interaction.
9/There was no stylus..no pen. How could one input or be PRODUCTIVE? PC brains were so wedded to a keyboard, mouse, and pen alternative that the idea of being productive without those seemed fanciful. Also instant standby, no viruses, rotate-able, maintained quality over time…
That leaves the business model, and this is perhaps Amazon’s biggest advantage of all: Google doesn’t really have one for voice, and Apple is for now paying an iPhone and Apple Watch strategy tax; should it build a Siri-device in the future it will likely include a healthy significant profit margin.
Amazon, meanwhile, doesn’t need to make a dime on Alexa, at least not directly: the vast majority of purchases are initiated at home; today that may mean creating a shopping list, but in the future it will mean ordering things for delivery, and for Prime customers the future is already here. Alexa just makes it that much easier, furthering Amazon’s goal of being the logistics provider — and tax collector — for basically everyone and everything.
Punch cards to WIMP, WIMP to fingers, and fingers to voice. As that last article makes clear, one needs to think not just of the evolution, but also about how business models have changed over time, and have caused input methods to change – but also how input methods have changed, and caused business models to change.
In other words, understanding technology is as much about understanding economics, and strategy, as it is about understanding technology itself.
In the next Tuesday essay, we’ll take a look Google in greater detail, and then about emergent business models in the tech space.
How and why did we move away from desktop computers towards laptops? Although this next question isn’t the focus of today’s links, it is worth asking in this context: has the tendency to miniaturize accelerated over time? Mainframes to desktops, desktops to laptops, and then netbooks, phones, tablets to wearables – and maybe, in the near future, implants?
(Note to self: it might be worth thinking through how attention spans have also been miniaturized over the same period, and the cultural causes and effects of this phenomenon.)
But for us to be able to answer these questions, we first need to lay the groundwork in terms of understanding how we moved away from mainframes to laptops.
The first portable computer was the IBM 5100, released in September 1975. It weighed 55-pounds, which was much lighter and more portable than any other computer to date. While not truly a laptop by today’s standards, it paved the way for the development of truly portable computers, i.e. laptops.
Though the Compass wasn’t the first portable computer, it was the first one with the familiar design we see everywhere now. You might call it the first modern laptop.
The Compass looked quite different than the laptops of 2016 though. It was wildly chunky, heavy and expensive at $8,150. Adjusted for inflation, that’s over $20,000 by today’s standards. It also extended far outward behind the display to help with heating issues and to house the computing components.
The portable micro computer the “Portal” of the French company R2E Micral CCMC officially appeared in September 1980 at the Sicob show in Paris. The Portal was a portable microcomputer designed and marketed by the studies and developments department of the French firm R2E Micral in 1980 at the request of the company CCMC specializing in payroll and accounting. It was based on an Intel 8085 processor, 8-bit, clocked at 2 MHz. It was equipped with a central 64K byte RAM, a keyboard with 58 alphanumeric keys and 11 numeric keys (in separate blocks), a 32-character screen, a floppy disk (capacity – 140,000 characters), a thermal printer (speed – 28 characters/second), an asynchronous channel, a synchronous channel, and a 220-volt power supply. Designed for an operating temperature of 15–35 °C, it weighed 12 kg and its dimensions were 45 × 45 × 15 cm. It ran the Prologue operating system and provided total mobility.
The Wikipedia article on the history of laptops is full of interesting snippets, including the excerpt above. In fact, interesting enough to open up a related article about the history of the Intel 80386, from which the excerpt below:
Early in production, Intel discovered a marginal circuit that could cause a system to return incorrect results from 32-bit multiply operations. Not all of the processors already manufactured were affected, so Intel tested its inventory. Processors that were found to be bug-free were marked with a double sigma (ΣΣ), and affected processors were marked “16 BIT S/W ONLY”. These latter processors were sold as good parts, since at the time 32-bit capability was not relevant for most users. Such chips are now extremely rare and became collectible.
Every now and then, there are entirely unexpected, but immensely joyful payoffs to the task of putting together these set of links. I started off reading about the evolution of laptops, and wanted to post a link about the development of LCD screens, without which laptops simply wouldn’t be laptops. And I ended up reading about, I kid you not, carrots.
Liquid crystals were accidentally discovered in 1888 by Austrian botanist Friedrich Reinitzer while he studied cholesteryl benzoate of carrots. Reinitzer observed that when he heated cholesteryl benzoate it had two melting points. Initially, at 294°F (145°C), it melted and turned into a cloudy fluid. When it reached 353°F (179°C), it changed again, but this time into a clear liquid. He also observed two other characteristics of the substance; it reflected polarized light and could also rotate the polarization direction of light.
Surprised by his findings, Reinitzer sought help from German physicist Otto Lehmann. When Lehmann studied the cloudy fluid under a microscope, he saw crystallites. He noted that the cloudy phase flowed like a liquid, but that there were other characteristics, such as a rod-like molecular structure that was somewhat ordered, that convinced Lehmann that the substance was a solid. Lehmann continued to study cholesteryl benzoate and other related materials. He concluded the cloudy fluid represented a newly discovered phase of matter and called it liquid crystal.